Reply To: If they only increased wages…


“Businesses always employ the people they need to employ to get the job done.” – That is not a meaningful response. In fact, it is contradicted by just about any business you can think of. Think of any factory, school, hair salon, restaurant, an electric company, investment bank, landscapers, etc. Immediately, you can think of a practical way of firing employees and redistributing their tasks. Or, if their tasks were non-essential the business may eliminate them altogether. Just think how many people have basic jobs working cash registers, filing papers, answering phones, cleaning, and taking out garbage. Would it really be impossible for businesses to continue operating if they had to fire a few of each?

The bottom line is this [which it sounds like you have already mentioned to your friend]: Businesses are not charities. They will NOT employ workers that cost more in wages than they contribute to the production/service. Granted, sometimes it is difficult to measure how much in dollars an assembly line worker contributes to the final product, but that is the job of entrepreneurs to estimate what is called the marginal revenue product of their employees. There is no doubt that employee wages will tend toward their marginal revenue product in an unhampered market. I can explain that further if necessary. Also, search for the minimum wage thread in the Austrian Economics discussion forum because that is where I learned a lot of the mechanics of this issue.

Here is a good video of one example: